Retail sales rose 0.4 percent, up from a flat reading in September, the Commerce Department said Wednesday. Sales were slightly held back by a steep drop in gas prices. Excluding sales at gas stations, retail spending rose an even stronger 0.5 percent.

Core sales, a category that excludes volatile spending on autos, building supplies and gas, also rose 0.5 percent, up from a 0.3 percent gain in September.

The retail sales gain indicates that consumers stepped up spending at the start of the October-December quarter. Their spending accounts for 70 percent of economic activity.

Cheaper gas may help boost sales during the crucial holiday shopping season. Gas prices have fallen sharply since Labor Day and now are around $3.21, the lowest level in nearly two years.

In October, sales at department stores rose 0.5 percent after having fallen 0.6 percent in September. There were also solid sales gains at furniture stores, electronics and appliance stores and specialty clothing stores.

In addition to the drop at gas stations, sales at building supply stores fell 1.9 percent in October.

Growth in consumer spending slowed from July through September and economists have been concerned that spending may remain lackluster given weak income growth and the lingering impact of higher federal taxes at the start of the year.

But in one encouraging sign, hiring has picked up in recent months. The economy created 204,000 jobs last month, many more than expected. Employers have added an average of 202,000 jobs per month from August through October. That's up sharply from an average of 146,000 in May through July.

The overall economy grew at an annual rate of 2.8 percent in the July-September quarter, faster than expected, and up from 2.5 percent growth in the April-June quarter. But much of the growth came from an increase in business stockpiling. Without a corresponding increase in spending, many economists think companies will cut back on restocking in the October-December quarter, which would slow economic growth.

Most analysts believe the economy is growing at an annual rate below 2 percent rate in the current quarter.